A test of momentum trading strategies in foreign exchange markets: evidence from the G7 | Zendy

Robert J. Bianchi | Zendy; Michael E. Drew | Zendy; John Polichronis | Zendy

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A test of momentum trading strategies in foreign exchange markets: evidence from the G7

Author(s) -

Robert J. Bianchi,

Michael E. Drew,

John Polichronis

Publication year - 2005

Publication title -

global business and economics review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.189

H-Index - 13

eISSN - 1745-1329

pISSN - 1097-4954

DOI - 10.1504/gber.2005.007613

Subject(s) - momentum (technical analysis) , foreign exchange , test (biology) , foreign exchange market , economics , high frequency trading , financial economics , business , monetary economics , algorithmic trading , geology , paleontology

In this trading strategy study, we ask three questions.\ud• does momentum exist in foreign exchange markets?\ud• what is the impact of transaction costs on excess returns?\ud• can a consolidated trading signal garner excess returns and if so, what is the\udsource of such returns?\udUsing total return momentum strategies in the foreign exchange markets of the\udG7 for the period 1980 through 2004, the answers from this study are as\udfollows: we find evidence of momentum; however, such momentum appears\udtransitory, particularly for longer lookback periods. As expected, transaction\udcosts have a material negative impact on excess returns. Finally, a consolidated\udsignal garners excess returns; however, a bootstrap simulation finds that the\udsource of these returns is a function of autocorrelation

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